Europe and now South Korea takes Harper close to fulfilling his promise on trade

OTTAWA – No one will ever again accuse Prime Minister Stephen Harper and his trade minister of not being able to land the big one.

After years of hooking minnows like Honduras, Panama and Jordan, Ottawa has now not only concluded talks with the world’s biggest economy — the European Union — but also with South Korea and, in doing so, opened the door to the world’s most promising market.

The double-coup will certainly become a bragging point for the prime minister in next year’s expected election campaign — before the impacts of the deals, both good and bad, are felt in the economy.

The prime minister has placed expanding trade, along with balancing the budget, at the top of the government’s economic action agenda and the Conservatives will likely be able to claim progress on both fronts by the fall of 2015.

The agreements also put the opposition — particularly the left-leaning New Democrats — in the unenviable position of either having to cheer “me too” or risk continuing to be portrayed as ideologically set against free trade, rather than a particular deal.

In an interview and news release, NDP trade critic Don Davies reserved judgment until the text of the South Korea deal is released, but blasted the government for an “utter lack of transparency,” and warned about possible damage to jobs in the auto sector.

The reaction from Liberal critic Chrystia Freeland was somewhat more positive, saying the party was “broadly supportive” but will need time to review the details.

Analysts say the South Korea deal, although it is far smaller in scope that the European agreement in principle, has the potential of being transformative in Canada’s dealings with what is becoming the world’s most important and biggest economic regions.

By way of comparison, Ottawa estimates free trade with Europe will expand Canada’s gross domestic product output by $12 billion once fully implemented, as opposed to only $1.7 billion in the case of Korea.

But Ian Lee, of the Sprott School of Business at Carleton University, says Korea’s significance is strategic.

“Now we’re in the major league,” he says. “I see South Korea not so much about the actual dollars of trade that’s involved, but it provides a beachhead into Asia and the Asian-Pacific countries that watch each other like a hawk. So it’s a very important precedent in what I believe is the most important part of the world.”

Next on the menu for Harper and Trade Minister Ed Fast are Japan, India and the biggest prize – the TransPacific Partnership, which includes many of the region’s key economies.

Asia Pacific Foundation of Canada president Yuen Pau Woo agrees Korea represents a “breakthrough” in the region that has resisted Canada’s entreaties for years.

“I think it will have a demonstrable effect on our Japan bilateral negotiations because Korea and Japan compete in our market in a number of sectors (particularly autos) and the Korea deal gives it an advantage over Japanese exporters,” he explained.

Economically, trade deals don’t show their true colours until years have passed.

Most economists and business leaders believe the removal of artificial barriers is a general good for a country’s well being, as it forces domestic producers to become more efficient and competitive, while offering consumers lower prices and a wider variety of goods.

Labour groups, however, argue that the theory works only when the playing field is level. In most cases, they see free trade agreements merely resulting in jobs gravitating to low-wage jurisdictions in a classic race to the bottom.

Ford Canada chief executive Dianne Craig’s chief argument in opposing the South Korea deal is not that the Canadian auto sector can’t cope with the removal of a 6.1 per cent tariff on overseas cars, but that South Korea is not a fair player in terms of trade in autos. The deal will allow South Korea to sell more cars in Canada, she believes, while deploying non-tariff barriers to keep Canadian-assembled cars out Korea.

Still the agreement is supported by the Canadian Council of Chief Executives, which includes Ford Canada and other motor companies as members.

CCCE president John Manley says Ford’s concern has the benefit of putting the government to the test, to ensure Korea does not thwart car imports.

The bigger game, however, is that Canada is positioning itself for the economy of the 21st century that will be dominated by the Asia-Pacific market.

“It’s not enough on its own, but it’s consistent with a broader strategy to build better trade links, including supply chains into Asia,” said Manley. “Canada is a small open economy and most of our sectors rely on the ability to export.”

As with the Canada-EU agreement, however, the Korean pact does not guarantee that Canadian firms will be successful in expanding exports and investments.

Toronto-based trade counsel Lawrence Herman says the deal, like all others, should be looked at as a “vehicle” that gives Canadian exporters in goods and services an opportunity, but does not mean they will succeed in seizing it.

He expects they will but also says he is confident that Canadian negotiators have given firms the best deal on offer.

“Canada has some of the best trade negotiators in the world, people don’t realize that,” he said. “They are not going to leave anything on the table.”

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